Increasing NTPL Capacity for the Future

• Author: Directorate-General for Energy (European Commission), ENCO
• Pages: 42-62

Final Report - MOVE/ENER/SRD/2016-498 Lot 2

Study on the insurance, private and financial markets in the field of nuclear third party liability

Page 42

5 INCREASING NTPL CAPACITY FOR THE FUTURE

5.1 ADDITIONAL CAPACITY FROM EXISTING MARKETS

One aspect of this study            

market players; the responses received to the       

financial security amount is possible immediately, as m ost of the current capacity providers could offer more

   I          94, the insurance market

is generally demand driven and many insurers could provide greater capacity than required today.

I    NTPL             

are compelled to cover with insurance (or other financial security95). Nuclear site operators, like any other

private sector business, will not buy insurance unnecessarily and if not required to do so; this is especially true

of liability, where possible claims do not have an immediately obvious financial cost and because any good

operator presumes its site will not suffer a severe accident. Typically, the obligation to buy third party liability

insurance of any type is prescribed by regulators o r state authorities96, in recognition of the fact that if not

compelled, many individuals and businesses would not consider buying such insurance. Therefore, the only way

NTPL capacity demand will increase is if these financial security amounts are raised by regulators or state

authorities.

The previous section demonstrated that there is material shortage of capacity to cover the full scope of the

revised NTPL regimes. Therefore, in ascertaining whether additional capacity is available from existing providers,

the research team investigated97 two aspects:

1. Can the existing providers offer more capacity?

2. Do the existing providers believe that the current lack of cover for the full scope of the revised

Conventions will be overcome?

Table 8 below shows the responses received from this research.

T    can increase NTPL capacity        

from the current capacity providers; this finding reinforce s the earlier finding that enough capacity is available

already to fulfil the current financial security requirements. If each active capacity provider could utilise its

maximum capacity for NTPL,  3 billion is available now and the responses received indicate that even

more capacity is available if there was demand for it. Of course, capacity to cover the proposed full scope of the

94Insurance markets generally               

policies) market. A hard market produces higher profits for insurers, which attracts more capital to the market leading to an oversupply

of capacity, which drives profits down. This leads to a soft market, where claims and more competition result in lower profits and even

corporate losses; at this point some insurers close or withdraw from the market, so reducing capacity and driving premiums up again,

because of capacity scarcity.

95 For example, see: 1960 Paris Convention Art. 10 (a).

96 For example third-party liability motor insurance for a prescribed minimum amount is compulsory in the EU, see

https://ec.europa.eu/info/law/motor-insurance-directive-2009-103-ec_en

97 The researchers invited all major capacity providers to respond to a questionnaire that investigated capacity, appetite for expansion,

attitude to the current difficulties and policy periods.

Final Report - MOVE/ENER/SRD/2016-498 Lot 2

Study on the insurance, private and financial markets in the field of nuclear third party liability

Page 43

NTPL Conventions remains insufficient, but assuming a solution for this problem can be found, then clearly

capacity is available from the private markets to ease at least some of the cost burden of a severe accident falling

upon the state.

T    Expect to cover full scope of revised Conventions     

resistance from the majority of the risk-transfer market to offering capacity for the extended prescription period

for bodily injury, about half of the EU MS nuclear pools believe that ultimately the risk-transfer market will offer

cover for the full scope of the revised Conventions. This belief is supported by experience, as most risk-transfer

insurers initially resisted providing cover for the environmental heads of damage98 in the revised Conventions,

yet today capacity for these heads of damage is readily available (see previous section).

The table shows that most of the self-insurance insurers already are comfortable providing capacity for the

extended prescription periods as is the risk-transfer MGA; therefore, it is not unreasonable to take an optimistic

view and assume that with the passage of time most insurers will provide capacity for the full scope of the

revised Conventions (including the extended prescription periods). The advantage of the global nuclear pooling

system99 is that the pools tend to operate in unison, thus once one or two major nuclear insurance pools offers

NTPL capacity for the full scope of the revised Conventions, the others will probably follow suit.

In the course of the research, the team also questioned the nuclear pools about their willingness to offer capacity

in new ways, either with a trigger mechanism that initiated cover for the difficult elements within the scope of

nuclear damage or outside the existing legal framework altogether. Several pools indicated that more capac ity

would be available for the difficult aspects of the revised Conventions (for example bodily injury) if a trigger with

a clear attachment point for the insurance cover was introduced; some also indicated positively that more

capacity could be available, depending on the type of product offered. These concepts are examined in the next

section.

Table 8: New capacity from current providers

Type

EU NTPL capacity

provider

Can increase NTPL capacity

Expect to cover full scope of

revised Conventions

RISK TRANSFER

BE POOL

NO

YES

BG POOL

NO

NO

CZ POOL

YES

YES

DE POOL

YES

NO COMMENT

ES POOL

YES

YES

FI/SE POOL

YES

UNSURE

FR POOL

YES

STATE TO COVER

HR POOL

YES

YES

HU POOL

YES

YES

NL POOL

NO

NO

RO POOL

NO COMMENT

NO COMMENT

SI POOL

YES

YES

SK POOL

YES

NO

98 “ OECD NEA N L B    Revised Paris and Vienna Nuclear Liability Conventions  Challenges for Insurers 

M. Tetley.

99 See technical annex 3.